Canada crude - Prices slide on extra pipeline rationing

Fri Nov 1, 2013 1:01pm EDT

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* Dec WCS trades at $40/bbl below WTI

* Dec synthetic hits $15/bbl below WTI

CALGARY, Alberta Nov 1 (Reuters) - Canadian heavy crude prices hit nine-month lows, and synthetic prices slumped to an 18-month trough on Friday after Enbridge Inc said it would ration space on additional pipelines in November.

Enbridge, whose pipelines carry the bulk of Canada's crude oil exports to the United States, told shippers on Thursday that it planned further cuts to nominated volumes, in addition to the November apportionment announced last week.

Increased pipeline rationing means more of the oil sands' fast-growing production may get bottlenecked in Canada, prompting deep discounts, as producers struggle to access better-priced markets outside Alberta.

Market sources in Calgary, Canada's oil capital, said the late notice of additional apportionment in November had left many traders and marketers scrambling to adjust.

"It's carnage," said one Calgary crude trader. "Or an opportunity, however you want to look at it. Logistically it's a pain in the arse."

Western Canada Select heavy blend for December delivery last traded at $40 per barrel below the West Texas Intermediate benchmark, according to Shorcan Energy brokers, compared with Thursday's settlement of $37.25 per barrel below WTI.

The price on Friday, the first day of the November trade cycle, was the widest differential since mid-January, when an extended period of heavy discounts on Canadian crude prompted Alberta politicians to coin the term "bitumen bubble."

The differential on light synthetic crude from the oil sands for December delivery widened to $15.00 per barrel below WTI.

That was the deepest discount since March 2012, according to Reuters data, and compares with a settlement price on Thursday of $12.75 per barrel below the benchmark.

Traders said reduced demand from Citgo Petroleum Corp's Lemont, Illinois, refinery was also weighing on heavy crude prices. The 174,500-barrel-per-day refinery, which runs on a diet of almost exclusively heavy Canadian crude, may be operating at little more than half capacity for months after a fire last week, sources say.

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